Guys, can you help me with this question Given: 6 - month T - bill with 4.25% YTM 1 year corporate bond with 4.55% YTM and 4.75% semi - annual coupon What would be the 1 - year spot rate, using the par yield curve and the given information a) 4.75% b) 4.756% c) 4.5% d) 4.513% Source Allen CFA QBank

Addition - I understand the calcualtion formula which provides the right answer, 2.375/1.02125 + 102.375/(1 + 0.5*X)^2 = 100 I don’t understand, why we use 100 instead of corp.bond price, which should be 2.375/(1+.0455/2)+102.375/(1+.0455/2)=100.241826 Can someone please clarify?

because the assumption is the 1 year corp bond matures at par… Which is normal, unless any non par call/put in place to confuse things further!

Yurik74 Wrote: ------------------------------------------------------- > Addition - I understand the calcualtion formula > which provides the right answer, > > 2.375/1.02125 + 102.375/(1 + 0.5*X)^2 = 100 > > I don’t understand, why we use 100 instead of > corp.bond price, which should be > 2.375/(1+.0455/2)+102.375/(1+.0455/2)=100.241826 > > Can someone please clarify? I think you are right, we should use bond price not par. you can use par only if you use ytm as coupon of the bond. are you sure they didnt use 2.275 as coupon?

presumably they use 100 and not the bond price as the question states “using the par yield curve”